Conduct Risk

Conduct Risk was defined by the former FSA in their 2011 Retail Conduct Risk Outlook as “the risk that firm behavior will result in poor outcomes for customers.” However, Conduct Risk goes beyond what has been expected of firms in the past, for example, in relation to suitability and Treating Customers Fairly (TCF).

There is a commonly held misconception that the issue of Conduct Risk applies only to the retail environment: the FCA places equal emphasis on conduct within the wholesale sector, and in particular, the pivotal role of wholesale conduct in ensuring the integrity of markets.

In recent years Conduct Risk has become an area of significant regulatory focus, with an increasing onus on firms to define and manage Conduct Risk explicitly as part of their risk management framework. The FCA has identified the following three key drivers of Conduct Risk:

Inherent factors

Structures and behaviors

Environmental factors

How Duff & Phelps can help

Our highly experienced team can help firms in all sectors of financial services with their Conduct Risk framework by focusing on the following key areas:

Determine the potential Conduct Risks inherent to the scale, scope and complexity of your firm’s activities